US Stocks Decline Following China Selloff; DJIA Off 82 Points

PeterA. McKay

U.S. investors shied from risk Monday, unloading stocks and oil following a big stock-market selloff in China.

The Dow Jones Industrial Average was recently down 82 points at 9462.20, hurt in part by a 1.6% decline in component Chevron. Aluminum maker Alcoa was also weak, off 2.9%.

The Nasdaq Composite Index was down 1.1%. The S&P 500 was off 1%. All its sectors traded lower, led by declines of nearly 2% each in energy and basic materials.

Crude-oil futures were recently down $3 to $69.73 a barrel at the New York Mercantile Exchange.

China's benchmark stock index, the Shanghai Composite, fell 6.7% to 2667.75, its lowest finish since May. It has given back nearly a quarter of its value since it peaked on Aug 4.

The latest round of China jitters comes at a time when many traders think that speculation had pushed oil's price ahead of what might be justified by supply and demand. Hopes in China's ability to provide new demand for oil to run factories, an expanding fleet of personal cars, and other machinery are fading.

"The energy markets have probably become the leading market for pricing in an economic] recovery in China," said energy analyst John Kilduff, of MF Global. "Now it looks like we're likely to consolidate for awhile."

Oil prices traded between $70 and $75 last week, but now seem likely to break below that, perhaps as low as $66, Kilduff said.

Blue-chip industrial stocks were also big losers as traders fretted about China's economy. Caterpillar and Boeing each fell nearly 3%. United Technologies was down more than 1%.

Dow component Walt Disney also declined, falling 2.4% after announcing it would acquire Marvel Entertainment for about $4 billion. Marvel, which is not a Dow stock, soared 26% on the news.

Investors are increasingly hungry to see data showing actual improvement in the global economy, not just a slowing contraction.

Those hopes will be tested again this week by a flurry of key releases, including a widely anticipated U.S. jobs data due Friday.

"The key thing right now is that the consumer probably isn't dead, but he is severely injured," said strategist Stephen P. Wood, of Russell Investments. "In that environment, the global economy is going to be growing at a much less brisk pace for some time."

Analysts expect that U.S. nonfarm payrolls shed 200,000 jobs in August. The unemployment rate is expected to tick up to 9.6%, compared to 9.4% in July.

The dollar rose against the euro but declined against the yen, which rose after a historic electoral victory by the upstart Democratic Party of Japan. Treasury prices were higher.

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